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Extended warranties, also called extended service plans and maintenance plans, are often seen as nothing but a money maker for the retailer. However I believe that extended warranties are perhaps one of the best investments a person can make. The reason for this is due to the lower quality control in today’s manufacturing process. As long as consumers keep demanding items at a lower and lower price point quality will suffer as will life span of the units. In the 60’s and 70’s a fridge for instance had a 30 year compressor warranty. Today that has dropped to between 5-10 years depending on the manufacturer.
Most appliances have a one year parts and labor warranty. Some parts may have a slightly longer warranty. The high cost of parts and labor make the cost of an extended warranty cheap insurance. If you have just one service call and have to replace even the most basic part it will cost more than the cost of an extended service plan. Imagine your dishwasher is a few months out of warranty and it starts sounding a little strange, most people will ignore the sound and hope it fixes itself. If you have an extended service plan you can call and they will come out and fix what ever is causing the strange sound if there is nothing seriously wrong you won’t be out a penny and if it is you are covered. Also repairs fall under Murphy’s Law, that being that an appliance will need repair when we can least afford it.
From retailer’s point extended service plan is the best customer service they can offer the the consumer. Manufacturers are sticklers for their warranty policies. I have spent hours pushing to no avail for a manufacturer to repair or replace an appliance. They will not authorize out of warranty repairs except under the most extreme circumstances. It is the retailer who is left to face the unhappy consumer. When I used to ask if the person had an extended service plan and they responded that they did, I would give a sigh of relief as I didn’t have to fight anyone to get the service performed. That is why I used to push the service plans.
Not all service plans are equal. Beware of plans that are only backed by the retailer and not an underwriter. Any plans not underwritten will be null and void if the retailer goes bankrupt. I had many people come expecting us to fulfill the terms of extended service plans of defunct retailers. Many unhappy people resulted from people who were left high and dry by those retailers.
Also watch out for the plans that include the manufacturer’s original warranty in the term. For instance a three year plan that starts from the date of purchase really isn’t a three year extended service plan but a two year plan. The manufacturer’s original year plus two additional years. Also watch out for plans that have a limit on the amount of service they will cover.
Look for plans that are renewable either thru the retailer or underwriter, as an appliance gets older it is more likely to need service and parts can be discontinued quickly. Look for a plan that offers a replacement on unrepairable appliances. Some plans offer a full or partial refund if they are not used. Maintenance plans can be different in that they offer preventative maintenance on appliances on a schedule. They may be more expensive due to the fact that parts are replaced whether or not they need it if they are scheduled to be replaced.
Some say they don’t want to buy the plans because they never use them. Buy logically we buy car insurance without the hope of using them, I buy life insurance with the hope I don’t use it in the near future but it is there for a safety net, but it doesn’t stop me from buying it.
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